Re: expected rate of inflation

Posted by mrittik on Jun 21, 2014; 6:35am
URL: http://discussion-forum.276.s1.nabble.com/expected-rate-of-inflation-tp7593249p7593250.html

Use the Fischer's eqn: i=r+pi(assume pi is the expected inflation rate)

In (Y,r) space:

i) if pi increased then obviously r decreased, so LM curve shifts at right.
ii) if pi decrease just the reverse case.

In (Y,i) space:

There is no change in LM curve becoz whether pi increased or decrease it has no effect on i.

u are requested to consult Dornsburg too.